As banks raise lending rates, home loans become more expensive.
The Reserve Bank of India (RBI) announced repeated upward adjustments to the repo rate – the rate at which it loans money to banks – in 2022. Not surprise, the present repo rate is 5.4 percent after three revisions this year since April 2022. Such similar increase is on the way to counteract inflation. This time, the RBI may raise the repo rate by 35-50 basis points, bringing it to around 6%.
Repo rate and home loan interest rate updates for 2022
PNB, a renowned public sector bank, has increased its Marginal Cost of Funds Based Lending Rate (MCLR) by 0.05 percent across all tenors, beginning September 1, 2022. ICICI Bank and Indian Bank have similarly raised their interest rates by 10 basis points, effective September 1, 2022 and September 3, 2022, respectively. Whereas Indian Bank’s MCLR will now be in the 6.95-7.75 percent range, ICICI Bank’s MCLR is now between 7.75 and 8%. Canara Bank has also upped its MCLR by up to 0.15 percent. MCLR rates at Indian Overseas Bank and Bank of Baroda (BOB) have also been raised by up to 0.10 percent. Although Indian Overseas Bank’s new rates went into effect on September 10, 2022, BOB’s rates will go into force on September 12, 2022.
The ongoing increasing adjustments in lending rates can be ascribed to the snowball effect of repo rate rises by the Reserve Bank of India (RBI) beginning in May 2022 with a 40 basis point increase. The RBI announced the other two modifications in June and August 2022, at 50 basis points each, bringing the current repo rate to 5.4 percent.
Banks have planned hikes in August 2022.
The State Bank of India (SBI) increased its MCLR by 20 basis points throughout all tenors for the third time, commencing from August 15, 2022. The bank earlier raised its lending rates in June 2022 in response to a 90-basis-point hike in the repo rate (bps). On August 5, 2022, the Reserve Bank of India (RBI) raised the lending rate by 50 basis points for the second time in less than two months. This resulted in changes to the lending rates of several banks. Upon the report, ICICI Bank raised its External Benchmark Lending Rate (EBLR) to 9.10 percent, with effect from August 5, 2022. PNB increased the Repo Linked Lending Rate (RLLR) to 7.90% from August 8, 2022. Furthermore, the Housing Development and Finance Corporation (HDFC) Bank increased its Retail Prime Lending Rate (RPLR) by 25 basis points, with force from August 9, 2022. Furthermore, BOB’s MCLR rise of up to 0.20 percent throughout tenors went into effect on August 12, 2022. In contrast to the MCLR increase, SBI increased its EBLR and RLLR by 50 basis points.
Similarly, Bajaj Housing Finance and LIC Housing Finance raised their loan rates by 0.50 percent. While Bajaj Housing Finance declared interest rates starting at 7.70 percent, LIC Housing Finance offered loans starting at 8%.
What exactly is the External Benchmark Lending Rate (EBLR)?
The External Benchmark Lending Rate (EBLR) is the minimum interest rate imposed by banks for lending loans. It is determined by external standards like as the repo rate. The standard is set for floating-rate loans.
What exactly is the Repo Linked Lending Rate (RLLR)?
The Repo Linked Lending Rate (RLLR) is a lending rate that is linked to the RBI’s repo rate. The RLLR is directly affected by changes in the repo rate. In the instance of an RLLR loan, the floating interest rate will swing up and down in response to changes in the repo rate.
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